Every sale starts with a successful plan. Often, these plans contain a variety of information about the tactics to be used, the KPIs and metrics to measure, and the overall sales budget. A sales budget is an essential, itemized, and detailed plan estimate the total revenue a company will make in a specific period. Understanding how sales budgeting works can help your business be more efficient.
A sales budget is essentially a financial plan, used to estimate the revenue a company can achieve within a specific time period. Using a sales budget formula, companies can analyze the potential results of their sales relationships, and their capacity for profit.
When sales budgeting, companies take two important things into account: the number of products being sold, and the price points of these products. Notably, sales budgeting isn’t the same as “sales forecasting”. With a sales budget, you use accurate reports and data to understand your budget. With sales forecasting, you estimate potential future revenue.
A sales budget is also not the same as a “sales expense budget” which looks at how much the business might spend to acquire and convert customers.
Learning how to prepare a sales budget is important for helping businesses to estimate performance, and determine how much revenue they can make from a specific product. A sales budget can be included as part of a “sales rundown” for a product or service. It also assists businesses in making sure they’re getting the most out of their resources.
With effective sales budgeting, business leaders can gain access to a useful planning tool for setting benchmarks and goals. For instance, if a company has an overall annual sales budget of $1000, this can be divided by four to determine quarterly goals for the team.
Using these sales budget driven goals, business leaders can then determine how successful their organization might be in different time periods, by comparing the goals, to the sales achieved. Sales budgeting can also help with:
There’s no one-size-fits-all sales budget formula which is guaranteed to be suitable for every business. To ensure success and growth, companies need to make sure they’re considering previous sales patterns and budgets for similar time periods, while setting targets for the future.
When preparing a sales budget, business leaders should ensure they:
There are three essential elements often included in a sales budget formula. These include:
Figuring out how to prepare a sales budget is something most companies will perfect over time. Although the exact nature of your sales budgeting strategy might vary, it will usually include the following steps:
An example of a sales budget may look like this. If you sell books for $10 each from your publishing company, and you sell 1,000 books during your first quarter, you can predict a future sales budget of $10,000. If you sell 1,800 books during the next quarter, you may increase your sales budget to $18,000 for the second part of the year.